Eurozone markets stronger on positive news

European markets rose Tuesday morning following the release of positive German consumer confidence data, while U.S. markets got bad news on the small business and trade deficit fronts, according to an analysis by Miller Tabak & Co. Chief Economic Strategist Andrew Wilkinson.

The ZEW Survey for December showed that investors are still doubtful about the current economic situation, but the Economic Sentiment Index rose to 6.9 from -15.7, indicating that they are increasingly optimistic about the country’s economic growth prospects.

Elsewhere in Europe, Italian markets rallied on hopes that Prime Minister Mario Monti might run in upcoming elections, despite his announcement this weekend that he would resign his post after passing a 2013 budget, Wilkinson says. “As we suggested yesterday the euro is feeling little impact from the rise of renewed turmoil across the Eurozone—indeed the expression ‘water off a duck’s back’ springs to mind as the unit once again flirts with $1.3000 against the dollar this morning,” Wilkinson says.

On the domestic front, the U.S. trade deficit grew from $40.3 billion to $42.2 billion between September and October, according to numbers released Tuesday by the U.S. Bureau of Economic Analysis and the U.S. Census Bureau through the Department of Commerce.

A 3.6% drop in exports of goods and services contributed to the overall widening of the gap. “It is becoming clearer that sluggishness in manufacturing is significantly due to a decline in global trade,” according to an analysis from the Wall Street Journal Market Data Center. “Weakness in goods exports showed up in all major end-use categories, led by a $2.9 billion drop in industrial supplies, including a subcomponent fall of $0.9 billion in nonmonetary gold.”

The Small Business Optimism Index, released by the National Federation of Independent Business (NFIB) Tuesday, fell 5.6 points to a reading of 87.5. Significantly, 49% of small business owners expect business conditions to be worse in six months, a 30 point increase from the last report.

Although it attributed some of the drop to Hurricane Sandy, the NFIB placed most of the blame on the results of the November presidential election. “Between the looming ‘fiscal cliff,’ the promise of higher health-care costs and the endless onslaught of new regulations, owners have found themselves in a state of pessimism,” NFIB Chief Economist Bill Dunkelberg said in a statement. “We are forced to ask: Is this the new normal?”

Still, Wilkinson says, there was one bit of good news in the NFIB report: The percentage of firms that said they were likely to increase hiring increased by 1% last month. In the long term, he is optimistic about the country’s economic prospects. “Until such time as political faces in Washington stand jointly at the press podium with happy-smiling faces, we can all sweat over the gloomier outlook for the economy,” he says. “We remain upbeat that beyond the time of an agreement, the economy will enjoy an upswing.”